S. Suite Property Management Inc. v. Canada Revenue Agency (August 16, 2013) is a decision of the Ontario Superior Court of Justice dealing with an attempt to control collection activities of CRA. The factual background was not complex:
[3] The facts giving rise to this application, for the most part, are not in dispute. The Applicant, S. Suite Property Management Inc. [“S. Suite”], is in the business of managing properties owned by various landlords in Toronto, and other areas of southern Ontario. Roxane Bernhard is the president of S. Suite. Pursuant to a property management agreement [“the agreement”], the Applicant collects rent monies from the tenants, pays various expenses associated with the property and forwards the balance of the funds to the landlords. The agreement was attached as an exhibit to the affidavit of Ms. Bernhard sworn May 31, 2013. The agreement requires the Applicant to collect rents and security deposits, to “deposit all receipts collected in a trust account” from which all expenses would be paid. Following this the Applicant is required to “promptly deposit the rent collected, less the management fee and any other expenses, into the owners’ bank account.”
[4] The Applicant acknowledges that there is a debt owing to the Respondent for taxes from 2011 plus interest and penalties. The Applicant retained counsel in January 2013 to negotiate payment of the outstanding amounts.
[5] The Respondent issued a Requirement to Pay [“RTP”] on February 18, 2013 which was sent to Bank of Montreal [“the bank”] where the Applicant kept a number of accounts. Pursuant to this RTP, funds in the amount of $24,274.38 were garnisheed from various accounts of the Applicant at the bank. By letter dated March 10, 2013, the solicitor for the Applicant contacted the Respondent and advised that the account from which the monies were obtained is a trust account which consisted of monies received on behalf of property owners and requested a return of the monies from the trust account.
[6] The Respondent refused to do so. By letter dated March 12, 2013 [exhibit H to the Bernhard affidavit] there seems to be an acknowledgement that the funds were taken from trust accounts, but no explanation is provided for the refusal to return the monies.
[7] The Respondent issued a second RTP on May 7, 2013; it received $45,433.40 from the bank accounts in the name of the Applicant. The total received by the Respondent pursuant to the RTP’s is $76,344.21.
[8] Included in the materials of the moving party is the affidavit of Ahmad Charles sworn July 4, 2013. Mr. Charles is the accountant for the Applicant and he reviewed the banking records. He confirms that no GST or HST or payroll remittances were ever deposited into the landlords’s bank accounts; rather, the taxes and payroll remittances were deposited into a different account, one which was not seized pursuant to the RTPs.
[9] The affidavit of Ms. Bernhard states that the monies collected by the Applicant belong to the landlords and the funds are administered by the Applicant.
Counsel for CRA argued that a portion of the relief sought amounted to injunctive relief which exceeded the jurisdiction of the Superior Court:
[17] In the case before me, the Applicant seeks: a) a declaration that the funds held in certain accounts at the Bank of Montreal are owned by the landlords; b) a declaration that the Respondent cannot seize the funds held in the trust accounts; c) an order directing the Respondent to return the trust funds seized and return them to the trust accounts. Counsel for the CRA submits that item b is in reality an injunction because it seeks to have the Respondent prohibited from a certain action. Further, it is submitted that item c is a direction, which is a mandatory injunction which requires the CRA to do something. In essence, Ms. Kar submits that the Applicant cannot do through the back door what it cannot do through the front. To put it another way, the CRA argues that the Applicant cannot frame the relief sought in certain language to make it seem that it is within the jurisdiction of the Superior Court. Rather, the court must take a hard look at what is actually being sought in the action and determine if it is within the jurisdiction of the Federal Court.
The court cited recent jurisprudence in Ontario holding that the Superior Court no longer had jurisdiction to enjoin a federal board, commission or tribunal (which, by definition, includes CRA):
[19] I find the case of Burkes v. CRA, 2010 ONSC 3485 (CanLII), 2010 ONSC 3485, [2010] 6 C.T.C. 295, leave to appeal denied by the Divisional Court, 2010 ONSC 6059 (CanLII), 2010 ONSC 6059, [2011] 2 C.T.C. 40 (Div. Ct.), of particular assistance. In that case, the Plaintiff brought a motion for an injunction restraining the CRA from further collection efforts on outstanding taxes, which were admittedly owed. The action brought by the Plaintiff claimed damages for a variety of torts allegedly committed by the Defendant CRA. In dealing with the motion for an injunction, Justice Belobaba considered the issue of jurisdiction and in a most helpful analysis, reviewed the recent case law. I find the statements of Justice Belobaba directly applicable to the facts of the case before me and consequently, I refer to the salient portions of his decision as follows (all in-text citations added):
It is beyond dispute that the Superior Court is a court of general jurisdiction and has inherent jurisdiction to adjudicate virtually any kind of claim in any area of the law [see: Telezone Inc. v. Canada (Attorney General), 2008 ONCA 892 (CanLII), 2008 ONCA 892, 94 O.R. (3d) 19, at para. 4; 80 Wellesley St. East Ltd. v. Fundy Bay Builders Ltd., 1972 CanLII 535 (ON CA), [1972] 2 O.R. 280 (C.A.), at para. 9]. The legislature may divest from this universal jurisdiction if it does so in unequivocal terms [see: Telezone, at para. 5; Wellesley, at para. 9]. The legislature, for example, may stipulate that certain remedies in certain situations can only be obtained in another forum [see: Telezone, at para. 5].
10 Section 18 of the Federal Court Act is one such legislative provision. Section 18 deals with remedies and provides, inter alia, that only the Federal Court can issue an injunction against “a federal board, commission or tribunal” [see: Telezone, at para. 94]. Section 2 of the Act provides that a federal board, commission or tribunal is any body or person that exercises powers conferred by an Act of Parliament.
…
13 In short, section 18 of the Federal Court Act has unequivocally divested the Superior Court of its jurisdiction to grant an injunction against a federal board, commission or tribunal. This particular remedy can only be granted by the Trial Division of the Federal Court [see: Mosseau v. Canada (Attorney General) 1993 CanLII 3098 (NS CA), (1993), 126 N.S.R. (2d) 33 (C.A.), at para. 10].
The court held that it had to look to the substance of the application, not merely the form in which it is cast:
[25] The Divisional Court agreed and confirmed, at para. 6, the motion judge’s observation that if a Plaintiff could bring an action for damages against a Federal board and by doing so, create jurisdiction to issue an injunction this would “effectively eviscerate” s. 18 of the Federal Court Act. As noted by the motion judge, “The will of Parliament to have injunctive relief against Federal boards granted exclusively by the Federal Court could be thwarted simply by commencing a nominal action for damages alleging monetary harm arising from the same conduct sought to be enjoined. It is the substance of the Plaintiff’s motion and the relief sought that govern the determination of jurisdiction, rather than the form of the motion. The Plaintiff cannot escape the operation of s. 18 of the Federal Court Act by seeking identical relief while naming an additional defendant.”
The court concluded that paragraphs (b) and (c) of the relief claimed amounted in substance to injunctive relief; those paragraphs were accordingly struck:
[26] It is clear to me that what is being sought by the Applicant against the CRA is to prevent this Federal body from collecting taxes pursuant to statutory powers conferred upon the CRA and further, to require the CRA to return monies already obtained through these specific powers. In my view, the remedies sought are governed by s. 18 of the Federal Court Act and consequently, this court does not have jurisdiction.
ORDER
[27] The relief sought in paragraphs 1 (b) (c) [sic] is dismissed as this court has no jurisdiction to make the orders requested.
This decision is a useful reminder of the limits upon actions against CRA in provincial superior courts.